The Competitive Advantage Of Nations

In the Preface and Introduction, Porter outlines the broad questions that inform The Competitive Advantage of Nations: “why [...] some social groups, economic institutions, and nations advance and prosper” (xi) and why some firms and industries succeed in certain national contexts, bringing prosperity in their wake, but fail in others. To address these questions, Porter departs from traditional approaches to the question, which have focused on macro-economic issues related to national economies and government. In contrast, Porter begins with the micro-economic foundation of the individual company. By first examining why firms gain competitive advantage, he hopes to address why nations succeed. He looks at successful firms in 10 leading economies: Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, the UK, and the US. Porter draws case studies from advanced industries in which those nations hold a particular edge.

In Chapter 1 Porter examines various definitions of national competitiveness. As he highlights, this is often considered a function of trade balance. In this view, a competitive nation is one “with a large and positive balance of trade” (5) between exports and imports. However, as he points out, many poorer nations have balanced trade. Meanwhile, wealthier nations often run deficits, most notably the US, which has been in deficit most years since 1970.